Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
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Chapter 19, Problem 6QFR
To determine
To explain:
Whether the transfer payment from the government in a year's
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Chapter 19 Solutions
Principles of Economics (Second Edition)
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- Why might even real GDP be a misleading index of changes in output between 1950 and 2015 in the United States?arrow_forwardIf the GDP deflator is equal to 100, then for that year nominal GDP is equal to real GDP. True or False? explainarrow_forwardWhen calculating real GDP we must use the GDP deflator for that year. This allows us to adjust figures measured in current prices for the rate of inflation, and show them in terms of a base year. Assuming that GDP in current prices grows from £120bn in year 1 to £160bn in year 2 and that the GDP deflator rises from 100 in year 1 to 130 in year 2, by how much has real GDP grown?arrow_forward
- What is the relationship of the GDP deflator to real GDP? To make comparisons across time or across borders, one must use the notion of a GDP deflator to convert nominal GDP into real GDP for comparisons. Nominal variables are in current dollars and have price level changes such as inflation and deflation included in them. Real variables are in constant dollars due to the factoring out of price level changes using a base year and a deflator. What is the current nominal GDP for the US economy? What is the current real GDP for the US economy?arrow_forwardThe participation of women in the Gambian labor force has risen dramatically since 2000. How do you think this rise affected GDP? Now imagine a measure of well-being that includes time spent working in the home and taking leisure. How would the change in this measure of well-being compare to the change in GDP? Can you think of other aspects of well-being that are associated with the rise in women’s labor-force participation? Would it be practical to construct a measure of well-being that includes these aspects?arrow_forwardCalculate the inflation rate using the GDP deflator based on the Laspeyres, Paasche, and chain- weighted indexes of GDP (use the approximate formula).arrow_forward
- Over the years, as the US has passed from an industrial to a service economy, have US national income accounting calculations changed?arrow_forwardConsider an economy that only produces and consumes two goods - cars and blankets. Suppose the inflation rate based on the consumer price index is higher during the year than that based on the GDP deflator. Assuming underlying tasted and preferences in the economy stay the same, what can you say about the price movements of cars and blankets during the year? The prices of cars and blankets must have changed at different rates, causing consumers to substitute one of the goods for the other. Since the GDP deflator is calculated based on what is actually purchased, it takes that substitution into account. O The relative price of cars and blankets must have remained unchanged. O The prices of cars and blankets must have changed at different rates, causing consumers to substitute one of the goods for the other. Because the consumer price index is a fixed-weight index, it understates the rate of inflation in this situation. O Regardless of what happened the prices of cars and blankets during…arrow_forwardIf your nominal income rose by 5.3 percent and the price level rose by 3.8 percent in some year, by what percentage would your real income (approximately) increase?arrow_forward
- If a surfboard is produced this year but not sold until next year, how is it counted in this year's GDP and not next years?arrow_forwardWhat is the level of nominal GDP in France this year? FRED tells you that the real GDP is chained in a specific year (this means that it is evaluated in terms of constant prices for that year). Note that the real GDP and the nominal GDP series cross at one point. Why does this happen? ANSWER FROM THE GARPH.arrow_forwardConsider the following data for a hypothetical economy that produces two goods, milk and cheese. Quantity Produced Mak (litres) Cheese (kg) 110 121 Year 1 Year 2 Prices Milk (Slitro) Cheese (S/kg) 6 7 66 3 Using year 1 as the base year, the 53 35% increase in nominal GDP may be explained by a % increase in real GDP and a 1% increase in prices (Round your responses to two decimal places)arrow_forward
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